Riddle & Co. v. Mandeville & Jamesson

9 U.S. 322 (1809) 5 Cranch 322

RIDDLE & CO.
v.
MANDEVILLE AND JAMESSON.

Supreme Court of United States.

March 13, 1809.

E.J. Lee, for the plaintiffs in error.

Youngs, contra.

MARSHALL, Ch. J. delivered the opinion of the court as follows:

This suit is brought by the holder of a promissory note to recover its amount from a remote endorsor. In a suit between the same parties, this court had previously determined that the plaintiff was without remedy at law. It is now to be decided whether he is entitled to the aid of a court of equity.

If, as was stated by the counsel for the defendants, the question is, whether a court of chancery would create contracts into which individuals had never entered, and decree the payment of money from persons who had never undertaken to pay it, the time of this court has been very much misapplied indeed in attending to the laborious discussion of this cause. The court would, at once, have disclaimed such a power, and have terminated so extraordinary a controversy.

But the real questions in the case are understood to be, whether the plaintiffs, as endorsees of a promissory note, have a right, under the laws of Virginia, to receive its amount from the endorsor on the insolvency of the maker; whether the defendants, as the original endorsors of the note, are ultimately responsible for it; and whether equity will decree the payment to be immediately made, by the person ultimately responsible, to the person who is actually entitled to receive the money.

This note came to the hands of M``Clenachan, endorsed in blank by Mandeville and Jamesson. M``Clenachan had a right to fill up the endorsement to himself, and he has done so. The law, as understood in Virginia, immediately implied an assumpsit from Mandeville and Jamesson to M``Clenachan to pay him the amount of the note, if he should use due diligence, and should be unable to obtain payment from the maker. M``Clenachan endorsed this note to the plaintiffs, and, by so doing, became liable to them in like manner as Mandeville and Jamesson were liable to him.

The maker having proved insolvent, the plaintiffs have a legal right to claim payment from M``Clenachan, and, on making that payment, M``Clenachan would be reinvested with all his original rights in the note, and would be entitled to demand-payment from Mandeville and Jamesson.

If there were twenty successive endorsors of a note, this circuitous course might be pursued, and, by the time the ultimate endorsor was reached, the value of the note would be expended in the pursuit. This circumstance alone would afford a strong reason for enabling the holder to bring all the endorsors into that court which could, in a single decree, put an end to litigation. No principle adverse to such a proceeding is perceived. Its analogy to the familiar case of a suit in chancery by a creditor against the legatees of his debtor is not very remote. If an executor shall have distributed the estate of his testator, the creditor has an action at law against him, and he has his remedy against the legatees. The creditor has no action at law against the legatees. Yet it has never been understood that the creditor is compelled to resort to his legal remedy. He may bring the executor and legatees both before a court of chancery, which court will decree immediate payment from those who are ultimately bound. If the executor and his securities should be insolvent, so that a suit at law must be unproductive, the creditor would have no other remedy than in equity, and his right to the aid of that court could not be questioned.

If doubts of his right to sue in chancery could be entertained while the executor was solvent, none can exist after he had become insolvent. Yet the creditor would have no legal claim on the legatees, and could maintain no action at law against them. The right of the executor, however, may, in a court of equity, be asserted by the creditor, and, as the legatees would be ultimately responsible for his debt, equity will make them immediately responsible.

In the present case, as in that which has been stated, the insolvency of M``Clenachan furnishes strong additional motives for coming into a court of chancery. Mandeville and Jamesson are ultimately bound for this money, but the remedy at law is defeated by the bankruptcy of an intermediate endorsor. It is only a court of equity which can afford a remedy.

This subject may and ought to be contemplated in still another point of view. It has been repeatedly observed that the action against the endorsor is not given by statute. The contract on which the suit is maintained is not expressed, but is implied from the endorsement itself, unexplained and unaccompanied by any additional testimony. Such a contract must, of necessity, conform to the general understanding of the transaction. General opinion certainly attaches credit to a note, the maker of which is doubtful, in proportion to the credit of the endorsors, and two or more good endorsors are deemed superior to one. But if the last endorsor alone can be made responsible to the holder, then the preceding names are of no importance, and would add nothing to the credit of the note. But this general opinion is founded on the general understanding of the nature of the contract. The endorsor is understood to pass to the endorsee every right founded on the note which he himself possesses. Among these is his right against the prior endorsor. This right is founded on an implied contract, which is not, by law, assignable. Yet if it is capable of being transferred in equity, it vests, as an equitable interest, in the holder of the note. No reason is perceived why such an interest should not, as well as an interest in any other chose in action, be transferible in equity. And if it be so transferable, equity will of course afford a remedy. The defendant sustains no injury, for he may defend himself in equity against the holder as effectually as he could defend himself against his immediate assignee in a suit at law.

The case put, of the sale and delivery of a personal thing, is not thought to be analogous to this. The purchaser of a personal thing does not, at the time of the contract, look beyond the vendor. He does not trace the title. It passes by delivery. But suppose the vendor held it by a bill of sale containing a warranty of title, and should assign that bill to his vendee; is it clear that, on loss of the property for defect of title, no recourse could be had to the warrantor of that title? The court is not prepared to answer this question in the affirmative.

It is contended that the endorsee of the note holds it subject to every equity to which it was liable in the hands of the endorsor.

If this be admitted, it is not perceived that the admission would, in any manner, affect this case.

It is also contended that the plaintiff can only recover what he actually paid.

Without indicating any opinion on this point, the court considers it as very clear that the endorsement is prima facie evidence of having endorsed for full value, and it is incumbent on the defendant to show the real consideration, if it was an inadequate one.

Usury has been stated in the argument, but it is neither alleged in the pleadings, nor proved by the testimony.

It is urged that Mandeville and Jamesson are securities who have received no actual value, and that equity will not charge a security who is discharged at law. In support of this argument the case of a joint obligation is cited.

It is true, that, in the case of a joint obligation, the court has refused to set up the bond against the representatives of a security. But, in that case, the law had absolutely discharged them. In this case, Mandeville and Jamesson are not discharged. They are not released from the implied contract created by the endorsement. It is the legal remedy which is obstructed; the right is unimpaired, and the original obligation is in full force.

It is, then, the opinion of this court that, without referring to the depositions to which exceptions have been taken, a right exists in the holder of a promissory note, at least where he cannot obtain payment at law, to sue a remote endorsor in equity.

Certainly, in such a case, the defendant has a right to insist on the other endorsors being made parties, but he has not done so; and, in this case, the court does not perceive that M``Clenachan is a party so material in the cause, that a decree may not properly be made without him.

The decree is reversed, and the defendants directed to pay the amount of the note to the plaintiffs.

The decree of the court was as follows:

This cause came on to be heard on the transcript of the record of the circuit court for the county of Alexandria, and was argued by counsel. On consideration whereof, the court is of opinion, that the decree of the said circuit court, dismissing the bill of the plaintiffs, is erroneous, and ought to be reversed; and this court doth reverse the same; and this court, proceeding to give such decree as the said circuit court ought to have given, doth decree and order, that the defendants pay to the plaintiffs the sum of 1,500 dollars, that being the amount of the note in the bill mentioned, together with interest thereon from the time the same became due.